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ANALYSIS
C.S.H.B. 1595 amends the
Finance Code to prohibit a person from entering into a litigation financing
transaction with a consumer except under a litigation financing agreement
that complies with the bill's provisions. The bill defines, among other
terms, "litigation financing transaction" to mean a non-recourse
transaction in which a litigation financing company purchases, and a consumer
assigns to the company, a contingent right to receive an amount of the
potential proceeds of a settlement, judgment, award, or verdict obtained in
the consumer's legal claim. The bill defines "litigation financing
agreement" to mean an agreement under which money is provided to or on
behalf of a consumer by a litigation financing company for a purpose other
than prosecuting the consumer's legal claim and the repayment of the money is
in accordance with a litigation financing transaction, the terms of which are
included as part of the litigation financing agreement. The bill exempts a
person from its provisions, except as specifically provided by the bill, if
the person enters into a litigation financing agreement with a consumer and
is an immediate family member of the consumer, an accountant who provides
accounting services to the consumer, or an attorney who, at the time money is
provided to or on behalf of the consumer under a litigation financing
agreement, has an attorney-client relationship with the consumer concerning
the consumer's legal claim.
C.S.H.B. 1595 entitles a party
to the legal dispute to which a litigation financing agreement relates to
obtain, under the rules applicable to discovery in the forum where the legal
claim is being resolved, contested, or litigated, discovery of the existence
of the agreement between the consumer and the litigation financing company, that
company's name and principal place of business, and the names of all company employees
who reside or work in the county in which the forum where the legal claim is
being resolved, contested, or litigated is located.
C.S.H.B. 1595 establishes that
an attorney representing a consumer in a legal claim is not under a duty to
assign any portion of payments from a settlement, judgment, award, or verdict
to the litigation financing company unless that attorney has agreed to do so
in writing.
C.S.H.B. 1595 requires a
litigation financing agreement to be in writing, to contain the initials of
the consumer on each page, and to be otherwise complete when presented to the
consumer for signature. The bill authorizes such an agreement to be entered
into only if the agreement relates to an existing legal claim that has been
made by or on behalf of the consumer against another person, including the
other person's insurer or the consumer's own insurer, or to an existing
proceeding in which the consumer's legal claim is intended to be resolved and
with regard to which the consumer is represented by an attorney.
C.S.H.B. 1595 requires a
litigation financing agreement to provide a right of rescission under which
the consumer may cancel the agreement without penalty or further obligation
if, not later than the fifth business day after the funding date, the
consumer returns to the litigation financing company the full amount of the
disbursed funds by personally delivering the company's uncashed check to the
company's office or mails by insured, certified, or registered United States
mail to the address specified in the agreement a notice of cancellation and
the full amount of disbursed funds in the form of the company's uncashed
check or a registered or certified check or money order.
C.S.H.B. 1595 requires a
litigation financing agreement to provide the terms required by the bill's provisions,
which are material terms and which must be disclosed as provided by the
bill's provisions. The bill requires the disclosures to be clear and
conspicuous and to be in at least 12-point bold type, except as otherwise
provided by the bill. The bill requires the front page of the agreement to
disclose, under appropriate headings, the funded amount to be paid to the
consumer by the litigation financing company, an itemization of one-time
charges, the total amount to be assigned by the consumer to the company,
including the funded amount and all charges, and a payment schedule that
includes the funded amount and charges and that lists all dates and the
amount due at the end of each 180-day period from the funding date until the
due date of the maximum amount due to the company by the consumer to satisfy
the amount owed under the agreement.
C.S.H.B. 1595 requires the
litigation financing agreement to include a specified statement regarding a
consumer's right to cancellation. The bill requires an agreement to disclose
that the litigation financing company may not participate in deciding
whether, when, or the amount for which a legal claim is settled; that the
company may not interfere with the independent professional judgment of the
attorney handling the legal claim or any settlement of the legal claim; and
that the consumer must notify the company of the settlement or adjudication
of the legal claim before the resolution date. The bill requires an agreement
to contain a specified statement establishing that the funded amount and
agreed-to charges are to be paid only from the proceeds from the consumer's
legal claim and only to the extent such proceeds are available, and a
specified statement suggesting the consumer take certain actions before
signing the agreement. The bill requires a litigation financing company to
require the amount due under an agreement to be paid to the company in a
predetermined amount based on periodic intervals from the funding date
through the resolution date, and not an amount determined as a percentage of
the recovery from the legal claim.
C.S.H.B. 1595, effective
January 1, 2014, requires a litigation financing company to obtain a license
from the Office of Consumer Credit Commissioner before engaging in an
activity in Texas that must be performed under a litigation financing
agreement that complies with the bill's provisions. The bill requires a
litigation financing company to file a license application in the form and
manner prescribed by the consumer credit commissioner. The bill requires the
application to contain all information the office requires to evaluate the
character and fitness of the applicant and, if the applicant is an entity, of
each company officer and director and to be accompanied by a reasonable fee
in an amount determined by the commissioner.
C.S.H.B. 1595 authorizes the
commissioner to require an applicant to file with the application or a
license holder to file a bond in an amount of up to $50,000 with terms running
concurrent with the licensing period. The bill requires the bond to provide
that the license holder will, during the licensing period, faithfully conform
to and abide by the bill's requirements and the rules adopted by the Finance Commission
of Texas to administer the bill's provisions and provide any amount that may
become due or owing to the state from the license holder under those
provisions. The bill authorizes an applicant or license holder, at the
applicant's or license holder's option, to post an irrevocable letter of
credit in lieu of the bond.
C.S.H.B. 1595 prohibits the
commissioner from issuing such a license unless the commissioner, following
an investigation, determines that the character and fitness of the applicant
or of the applicant company's officers and directors warrant belief that the
business will be operated honestly and fairly in accordance with the bill's
provisions. The bill requires the commissioner, on written request, to set a
hearing before the State Office of Administrative Hearings to determine an
applicant's qualifications for licensure if the commissioner has notified the
applicant in writing of the denial of the application or if the commissioner
has not issued a license before the 61st day after the date the applicant
filed the application. The bill prohibits an applicant from requesting a
hearing after the 16th day after the date the commissioner sends written
notice to the applicant that the application has been denied and stating the
reasons for the denial. The bill requires a litigation financing company to
renew its license on September 1 every two years by paying a renewal fee as
determined by the commissioner.
C.S.H.B. 1595 prohibits a
litigation financing company from the following:
·
paying or offering to pay a commission, referral fee, or other
form of consideration to an attorney, law firm, medical provider,
chiropractor, or physical therapist or an employee of such a person or entity
for referring a consumer to the company;
·
accepting any commission, referral fee, rebate, or other form
of consideration from an attorney, law firm, medical provider, chiropractor,
or physical therapist or an employee of such a person or entity;
·
intentionally advertising materially false or misleading
information about the company's products or services;
·
referring, to further an initial legal funding, a customer or
potential customer to a specific attorney, law firm, medical provider,
chiropractor, or physical therapist or an employee of such a person or entity,
except that the company may refer a customer or potential customer who needs
legal representation to a local or state bar association referral service;
·
failing to promptly supply a copy of the executed agreement to
the consumer's attorney;
·
knowingly providing funding to a consumer who has previously
assigned or sold a portion of the consumer's right to proceeds from the
consumer's legal claim without first paying to or purchasing from a
previously unsatisfied litigation financing company that company's entire
funded amount and charges due under that company's applicable agreement,
unless a lesser amount is otherwise agreed to in writing by the litigation
financing companies or multiple companies have agreed to concurrently provide
funding to a consumer, if the consumer consents to the arrangement in
writing;
·
making a decision relating to the conduct, settlement, or
resolution of the underlying legal claim, the power of which must remain
solely with the consumer and the attorney handling the legal claim; or
·
knowingly paying or offering to pay, using funds from the litigation
financing transaction, court costs, filing fees, or attorney's fees during or
after the resolution of the legal claim.
C.S.H.B. 1595 establishes that,
if a court finds that a litigation financing company has intentionally
violated the bill's provisions with respect to a litigation financing
transaction, the company is entitled to recover the funded amount provided to
the consumer and is prohibited from receiving any additional charges. The
bill establishes that certain statutory provisions relating to investigation
and enforcement, administrative penalties, restitution orders, assurance of
voluntary compliance, and judicial review apply to a violation of the bill's
provisions, including the power of the commissioner to assess an
administrative penalty against a person who knowingly and wilfully violates
or causes a violation of the bill's provisions or a rule adopted under the
bill's provisions.
C.S.H.B. 1595 requires the Finance
Commission of Texas to adopt the rules and procedures necessary to implement
the bill's provisions as soon as practicable after the bill's effective date,
but not later than January 1, 2014.
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INTRODUCED
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HOUSE COMMITTEE
SUBSTITUTE
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SECTION 1. Chapter 30, Civil
Practice and Remedies Code, is amended by adding Section 30.022 to read as
follows:
Sec. 30.022. DISCLOSURE
OF CONSUMER LAWSUIT LENDING TRANSACTION. (a) In this section,
"consumer lawsuit lender" and "consumer lawsuit lending
transaction" have the meanings assigned by Section 301.003, Finance
Code.
(b) In any civil action
with respect to which money has been or will be provided to or on behalf of
a plaintiff by a consumer lawsuit lender in a consumer lawsuit lending
transaction:
(1) the plaintiff must
produce to the opposing party, without awaiting a discovery request, all
documents that the plaintiff or the plaintiff's representative provided to
the consumer lawsuit lender; and
(2) the plaintiff must
file with the court and serve on the opposing party a copy of any agreement
between the plaintiff and a consumer lawsuit lender.
(c) If the consumer
lawsuit lending agreement is executed before the plaintiff's original
petition is served, the agreement shall be:
(1) filed with the court:
(A) promptly on execution
of the agreement; or
(B) together with the
filing of the plaintiff's original petition, if the plaintiff's original
petition has not been filed with the court at the time of the agreement's
execution; and
(2) served with the
plaintiff's original petition as provided by the Texas Rules of Civil
Procedure.
(d) If the consumer
lawsuit lending agreement is executed after the plaintiff's original
petition is served, the agreement shall be filed with the court and served
on the opposing party as provided by the Texas Rules of Civil Procedure not
later than the 10th day after the date the agreement is executed.
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No
equivalent provision.
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SECTION 2. Subchapter D,
Chapter 154, Civil Practice and Remedies Code, is amended by adding Section
154.074 to read as follows:
Sec. 154.074. DISCLOSURE
OF CONSUMER LAWSUIT LENDING TRANSACTION. (a) In this section,
"consumer lawsuit lender" and "consumer lawsuit lending
transaction" have the meanings assigned by Section 301.003, Finance
Code.
(b) In any dispute with
respect to which money has been or will be provided to or on behalf of a
complaining party by a consumer lawsuit lender in a consumer lawsuit
lending transaction, the complaining party must produce to the opposing
party, without awaiting a request in the nature of a discovery request, all
documents that the complaining party or the complaining party's
representative provided to the consumer lawsuit lender.
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No
equivalent provision.
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SECTION 3. Chapter 301,
Finance Code, is amended by adding Section 301.003 to read as follows:
Sec. 301.003. CONSUMER
LAWSUIT LENDING TRANSACTION. (a) In this subtitle, the following
definitions apply in the context of a consumer lawsuit lending transaction:
(1) "Consumer"
means an individual who is or may become a complaining party in a dispute
and to whom or on behalf of whom money is provided in a consumer lawsuit
lending transaction.
(2) "Consumer
lawsuit lender" means a person who provides money to or on behalf of a
consumer in a consumer lawsuit lending transaction. The term does not
include an attorney who, at the time money is provided to or on behalf of a
consumer in a consumer lawsuit lending transaction, has an attorney-client
relationship with the consumer concerning the consumer's dispute.
(3) "Consumer
lawsuit lending transaction" means a transaction in which:
(A) money is provided to
or on behalf of a consumer by a consumer lawsuit lender for a purpose other
than prosecuting the consumer's dispute; and
(B) the repayment of the
money is conditioned on and to be received from the consumer's proceeds of
the dispute, whether the proceeds are by judgment, settlement, or
otherwise.
(4) "Creditor"
includes a consumer lawsuit lender.
(5) "Dispute"
includes:
(A) a civil action;
(B) an alternative
dispute resolution proceeding; or
(C) an administrative
proceeding before an agency of this state.
(6) "Interest"
includes the amounts payable in a consumer lawsuit lending transaction to
the consumer lawsuit lender to the extent that those amounts in the
aggregate exceed the amounts provided by the consumer lawsuit lender to or
on behalf of the consumer in the transaction.
(7) "Loan"
includes the provision of money to or on behalf of the consumer in a
consumer lawsuit lending transaction, without regard to whether there is a
circumstance under which the consumer does not have an obligation to repay
to the consumer lawsuit lender the principal amount provided.
(8) "Obligor"
includes the consumer in a consumer lawsuit lending transaction.
(b) A consumer lawsuit
lending transaction and the parties to the transaction are subject to this
subtitle, including Section 303.201, in the same manner as a loan for
personal, family, or household use and the parties to such a loan.
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No
equivalent provision.
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SECTION 4. Subchapter A,
Chapter 342, Finance Code, is amended by adding Section 342.0015 to read as
follows:
Sec. 342.0015. DEFINITION
OF CONSUMER LAWSUIT LENDING TRANSACTION AND RELATED TERMS. In this
chapter, in the context of a consumer lawsuit lending transaction,
"consumer," "consumer lawsuit lender," "consumer
lawsuit lending transaction," "creditor,"
"dispute," "interest," "loan," and
"obligor" have the meanings assigned by Section 301.003.
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No
equivalent provision.
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SECTION 5. Section 342.005,
Finance Code, is amended to read as follows:
Sec. 342.005. APPLICABILITY
OF CHAPTER. (a) Except as provided by Sections 302.001(d) and
342.004(c), a loan is subject to this chapter if the loan:
(1) provides for interest in
excess of 10 percent a year;
(2) is extended primarily
for personal, family, or household use;
(3) is made by a person
engaged in the business of making, arranging, or negotiating those types of
loans; and
(4) either:
(A) is not secured by a lien
on real property; or
(B) is described by Section
342.001(4), 342.301, or 342.456 and is predominantly payable in monthly
installments.
(b) The amounts provided
by the consumer lawsuit lender to or on behalf of the consumer in a
consumer lawsuit lending transaction are considered to be amounts extended
primarily for personal, family, or household use. A consumer lawsuit lending
transaction is subject to this chapter if the amounts payable under the
transaction to the consumer lawsuit lender in the aggregate exceed the
amounts provided by the consumer lawsuit lender to or on behalf of the
consumer by an amount that, when aggregated and amortized using the
actuarial method during the term of the loan, provides for interest in
excess of 10 percent a year.
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No
equivalent provision.
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SECTION 6. Section
342.051(a), Finance Code, is amended to read as follows:
(a) A person must hold a
license issued under this chapter to:
(1) engage in the business
of making, transacting, or negotiating loans subject to this chapter; [or]
(2) contract for, charge, or
receive, directly or indirectly, in connection with a loan subject to this
chapter, a charge, including interest, compensation, consideration, or
another expense, authorized under this chapter that in the aggregate
exceeds the charges authorized under other law; or
(3) engage in a consumer
lawsuit lending transaction subject to this chapter or Subtitle A.
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No
equivalent provision, but see SECTION 1, Section 354.101, Finance Code,
below.
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SECTION 7. (a) Except as
otherwise provided by this section, the changes in law made by this Act
apply to and in connection with a consumer lawsuit lending transaction
entered into on or after the effective date of this Act. A consumer lawsuit
lending transaction entered into before the effective date of this Act is
governed by the law in effect when the transaction was entered into, and
the former law is continued in effect for that purpose.
(b) Section 30.022, Civil
Practice and Remedies Code, as added by this Act, applies only to an action
commenced on or after the effective date of this Act.
(c) Section 154.074, Civil
Practice and Remedies Code, as added by this Act, applies only to a dispute
resolution proceeding commenced on or after the effective date of this Act.
(d) The licensing
requirement of Section 342.051(a), Finance Code, as amended by this Act,
applies only in relation to a consumer lawsuit lending transaction entered
into on or after January 1, 2014. A consumer lawsuit lending transaction
entered into before January 1, 2014, is governed by the law in effect when
the transaction was entered into, and the former law is continued in effect
for that purpose.
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No
equivalent provision.
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No
equivalent provision.
No
equivalent provision.
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SECTION 1. Subtitle B, Title
4, Finance Code, is amended by adding Chapter 354 to read as follows:
CHAPTER 354. LITIGATION
FINANCING AGREEMENTS
SUBCHAPTER A. GENERAL
PROVISIONS
Sec. 354.001.
DEFINITIONS. In this chapter:
(1) "Advertise"
means to publish or disseminate a written, electronic, or printed
communication, or to publish, disseminate, circulate, or place directly or
indirectly before the public a communication by means of a recorded
telephone message or a communication transmitted on radio, television, the
Internet, or similar communications media, including film strips, motion
pictures, and videos, for the purpose of inducing a person to enter into a
litigation financing agreement.
(2) "Charge" or
"charges" means the amount paid to a litigation financing company
by or on behalf of the consumer, in addition to the funded amount provided
by or on behalf of the company to a consumer. The term includes:
(A) an administrative
fee, origination fee, underwriting fee, and other fees, regardless of how
the fee is denominated; and
(B) any amounts
denominated as interest.
(3) "Consumer"
means an individual who has a pending legal claim and who:
(A) resides in this
state; or
(B) has the legal claim
in this state.
(4) "Funded
amount" means the amount provided to or on behalf of the consumer
under a litigation financing agreement. The term does not include a charge.
(5) "Funding
date" means the date on which the litigation financing company:
(A) transfers the funded
amount to the consumer by personal delivery or by wire, ACH debit, or other
electronic means; or
(B) mails the funded
amount to the consumer by insured, certified, or registered United States
mail.
(6) "Immediate
family member" means:
(A) a parent, sibling,
spouse, grandparent, or grandchild of an individual; or
(B) a child related by
blood, adoption, or marriage to an individual.
(7) "Legal
claim" includes:
(A) a civil action;
(B) an alternative
dispute resolution proceeding; or
(C) an administrative
proceeding before an agency of this state.
(8) "Litigation
financing agreement" means an agreement under which:
(A) money is provided to
or on behalf of a consumer by a litigation financing company for a purpose
other than prosecuting the consumer's legal claim; and
(B) the repayment of the
money is in accordance with a litigation financing transaction the terms of
which are included as part of the litigation financing agreement.
(9) "Litigation
financing company" or "company" means a person that enters
into a litigation financing agreement with a consumer.
(10) "Litigation
financing transaction" means a non-recourse transaction in which a
litigation financing company purchases, and a consumer assigns to the
company, a contingent right to receive an amount of the potential proceeds
of a settlement, judgment, award, or verdict obtained in the consumer's
legal claim.
(11) "Office"
means the Office of Consumer Credit Commissioner.
(12) "Resolution
date" means the date on which the sum of the amount funded to the
consumer and the agreed-to charges is delivered to the litigation financing
company.
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No
equivalent provision.
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Sec. 354.002.
NONAPPLICABILITY OF CHAPTER. Except as specifically provided by this
chapter, this chapter does not apply to the following persons who enter
into a litigation financing agreement with a consumer:
(1) an immediate family
member of the consumer;
(2) an accountant who
provides accounting services to the consumer; or
(3) an attorney who, at
the time money is provided to or on behalf of a consumer under a litigation
financing agreement, has an attorney-client relationship with the consumer
concerning the consumer's legal claim.
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No
equivalent provision.
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Sec. 354.003. AGREEMENT
REQUIRED. A person may not enter into a litigation financing transaction
with a consumer except under a litigation financing agreement that complies
with this chapter.
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No
equivalent provision.
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Sec. 354.004. DISCOVERY
OF AGREEMENT. A party to the legal dispute to which a litigation financing
agreement relates is entitled to obtain, under the rules applicable to
discovery in the forum where the legal claim is being resolved, contested,
or litigated, discovery of:
(1) the existence of the
agreement between the consumer and the litigation financing company;
(2) the name and
principal place of business of the litigation financing company; and
(3) the names of all
employees of the litigation financing company who reside or work in the
county in which the forum where the legal claim is being resolved,
contested, or litigated is located.
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No
equivalent provision.
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Sec. 354.005. DUTY OF
ATTORNEY. An attorney representing a consumer in a legal claim is not
under a duty to assign any portion of payments from a settlement, judgment,
award, or verdict to the litigation financing company unless the attorney
has agreed to do so in writing.
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No
equivalent provision.
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SUBCHAPTER B. AGREEMENT
REQUIREMENTS
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No
equivalent provision.
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Sec. 354.051. FORM OF
AGREEMENT; REQUIREMENT OF EXISTING LEGAL CLAIM. (a) A litigation
financing agreement must:
(1) be in writing;
(2) contain the initials
of the consumer on each page; and
(3) be otherwise complete
when presented to the consumer for signature.
(b) A litigation
financing agreement may be entered into only if the agreement relates to:
(1) an existing legal
claim that has been made by or on behalf of the consumer against another
person, including the other person's insurer or the consumer's own insurer;
or
(2) an existing
proceeding in which the consumer's legal claim is intended to be resolved
and with regard to which the consumer is represented by an attorney.
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No
equivalent provision.
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Sec. 354.052. RIGHT OF
RESCISSION. A litigation financing agreement must provide a right of
rescission under which the consumer may cancel the agreement without
penalty or further obligation if, not later than the fifth business day
after the funding date, the consumer:
(1) returns to the
litigation financing company the full amount of the disbursed funds by
personally delivering the company's uncashed check to the company's office;
or
(2) mails by insured,
certified, or registered United States mail to the address specified in the
agreement a notice of cancellation and the full amount of disbursed funds
in the form of the company's uncashed check or a registered or certified
check or money order.
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No
equivalent provision.
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Sec. 354.053. REQUIRED
TERMS; DISCLOSURES. (a) A litigation financing agreement must provide the
terms required by this section, which are material terms and must be
disclosed as provided by this section. The disclosures must be clear and
conspicuous and, unless otherwise provided by this section, must be in at
least 12-point bold type.
(b) On the front page of
the agreement under appropriate headings, the agreement must disclose:
(1) the funded amount to
be paid to the consumer by the litigation financing company;
(2) an itemization of
one-time charges;
(3) the total amount to
be assigned by the consumer to the company, including the funded amount and
all charges; and
(4) a payment schedule
that:
(A) includes the funded
amount and charges; and
(B) lists all dates and
the amount due at the end of each 180-day period from the funding date
until the due date of the maximum amount due to the company by the consumer
to satisfy the amount owed under the agreement.
(c) The agreement must
contain the following statement within a box: "CONSUMER'S RIGHT TO
CANCELLATION: You may cancel this agreement without penalty or further
obligation within five business days after the funding date if you either:
"i. return to the
litigation financing company the full amount of the disbursed funds by
delivering the company's uncashed check to the company's office in person;
or
"ii. mail, by
insured, certified, or registered United States mail, to the company at the
address specified in the agreement, a notice of cancellation and include in
the mailing a return of the full amount of disbursed funds in the form of
the company's uncashed check or a registered or certified check or money
order."
(d) The agreement must
disclose that:
(1) the litigation
financing company may not participate in deciding whether, when, or the
amount for which a legal claim is settled;
(2) the company may not
interfere with the independent professional judgment of the attorney
handling the legal claim or any settlement of the legal claim; and
(3) the consumer must
notify the company of the settlement or adjudication of the legal claim
before the resolution date.
(e) The agreement must
contain in all capital letters the following statement within a box:
"THE FUNDED AMOUNT AND AGREED-TO CHARGES SHALL BE PAID ONLY FROM THE
PROCEEDS OF YOUR LEGAL CLAIM, AND SHALL BE PAID ONLY TO THE EXTENT THAT
THERE ARE AVAILABLE PROCEEDS FROM YOUR LEGAL CLAIM. YOU WILL NOT OWE
(INSERT NAME OF THE LITIGATION FINANCING COMPANY) ANYTHING IF THERE ARE NO
PROCEEDS FROM YOUR LEGAL CLAIM, UNLESS YOU HAVE VIOLATED ANY MATERIAL TERM
OF THIS AGREEMENT OR YOU HAVE COMMITTED FRAUD AGAINST THE LITIGATION
FINANCING COMPANY."
(f) Immediately above the
line for the consumer's signature, the agreement must contain the following
disclosure in 12-point type: "Do not sign this agreement before you
read it completely or if it contains any blank spaces. You are entitled to
a completed copy of the agreement. Before you sign this agreement, you
should obtain the advice of an attorney. Depending on the circumstances,
you may want to consult a tax, public or private benefits planning, or
financial professional."
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No
equivalent provision.
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Sec. 354.054. AGREEMENT
AMOUNT. A litigation financing company shall require the amount due under
the agreement to be paid to the company in a predetermined amount based on
periodic intervals from the funding date through the resolution date, and
not an amount determined as a percentage of the recovery from the legal
claim.
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No
equivalent provision, but see SECTION 6 above.
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SUBCHAPTER C. LICENSING
Sec. 354.101. LICENSE
REQUIRED; APPLICATION. (a) A litigation financing company must obtain a
license from the office before engaging in an activity in this state that
must be performed under a litigation financing agreement that complies with
this chapter.
(b) A litigation
financing company must file a license application in the form and manner
prescribed by the commissioner. The application must:
(1) contain all
information the office requires to evaluate the character and fitness of
the applicant, and if the applicant is an entity, the character and fitness
of each officer and director of the applicant company; and
(2) be accompanied by a
reasonable fee in an amount determined by the commissioner.
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No
equivalent provision.
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Sec. 354.102. BOND;
LETTER OF CREDIT. (a) The commissioner may require an applicant to file
with the application or a license holder to file a bond in an amount not to
exceed $50,000.
(b) The bond terms must
run concurrent with the licensing period. The bond must provide that the
license holder will, during the licensing period:
(1) faithfully conform to
and abide by:
(A) the requirements of
this chapter; and
(B) the rules adopted by
the finance commission to administer this chapter; and
(2) provide any amount
that may become due or owing to the state from the license holder under
this chapter.
(c) In lieu of the bond,
the applicant or license holder, at the applicant's or license holder's
option, may post an irrevocable letter of credit.
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No
equivalent provision.
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Sec. 354.103. ISSUANCE OF
LICENSE. The commissioner may not issue a license under this chapter
unless the commissioner, following an investigation, determines that the
character and fitness of the applicant or of the applicant company's
officers and directors warrant belief that the business will be operated
honestly and fairly in accordance with this chapter.
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No
equivalent provision.
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Sec. 354.104. HEARING.
(a) On written request, the commissioner shall set a hearing before the
State Office of Administrative Hearings to determine an applicant's qualifications
for licensure if:
(1) the commissioner has
notified the applicant in writing of the denial of the application; or
(2) the commissioner has
not issued a license before the 61st day after the date the applicant filed
the application.
(b) An applicant may not
request a hearing under this section after the 16th day after the date the
commissioner sends written notice to the applicant that the application has
been denied and stating the reasons for the denial.
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No
equivalent provision.
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Sec. 354.105. RENEWAL OF
LICENSE. A litigation financing company must renew its license on
September 1 every two years by paying a renewal fee as determined by the
commissioner.
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No
equivalent provision.
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SUBCHAPTER D. PROHIBITIONS
Sec. 354.151. PROHIBITED
ACTIVITIES OR CONDUCT. A litigation financing company may not:
(1) pay or offer to pay a
commission, referral fee, or other form of consideration to an attorney,
law firm, medical provider, chiropractor, or physical therapist or an
employee of a person described by this subdivision for referring a consumer
to the company;
(2) accept any
commission, referral fee, rebate, or other form of consideration from an
attorney, law firm, medical provider, chiropractor, or physical therapist
or an employee of a person described by this subdivision;
(3) intentionally
advertise materially false or misleading information about the company's
products or services;
(4) refer, to further an
initial legal funding, a customer or potential customer to a specific
attorney, law firm, medical provider, chiropractor, or physical therapist
or an employee of a person described by this subdivision, except that the
company may refer a customer or potential customer who needs legal
representation to a local or state bar association referral service;
(5) fail to promptly
supply a copy of the executed agreement to the consumer's attorney;
(6) knowingly provide
funding to a consumer who has previously assigned or sold a portion of the
consumer's right to proceeds from the consumer's legal claim without first
paying to or purchasing from a previously unsatisfied litigation financing
company that company's entire funded amount and charges due under that
company's applicable agreement, unless:
(A) a lesser amount is
otherwise agreed to in writing by the litigation financing companies; or
(B) multiple companies
have agreed to concurrently provide funding to a consumer, if the consumer
consents to the arrangement in writing;
(7) make a decision
relating to the conduct, settlement, or resolution of the underlying legal
claim, the power of which must remain solely with the consumer and the
attorney handling the legal claim; or
(8) knowingly pay or
offer to pay, using funds from the litigation financing transaction, court
costs, filing fees, or attorneys' fees during or after the resolution of
the legal claim.
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No
equivalent provision.
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SUBCHAPTER E. ENFORCEMENT
Sec. 354.201. VIOLATION
OF CHAPTER. (a) If a court finds that a litigation financing company has
intentionally violated this chapter with respect to a litigation financing
transaction, the company is entitled to recover the funded amount provided
to the consumer and may not receive any additional charges.
(b) In addition to any
other applicable investigative and enforcement provisions, Subchapters E,
F, and G, Chapter 14, apply to a violation of this chapter, including the
power of the commissioner to assess an administrative penalty under Chapter
14 against a person who knowingly and wilfully violates or causes a
violation of this chapter or a rule adopted under this chapter.
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No
equivalent provision.
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SECTION 2. As soon as
practicable after the effective date of this Act, but not later than
January 1, 2014, the Finance Commission of Texas shall adopt the rules and
procedures necessary to implement Chapter 354, Finance Code, as added by
this Act.
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No
equivalent provision.
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SECTION 3. The changes in
law made by this Act apply only to a litigation financing agreement entered
into on or after the effective date of this Act. A litigation financing
agreement entered into before the effective date of this Act is governed by
the law in effect on the date the agreement was entered into, and the
former law is continued in effect for that purpose.
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SECTION 8. This Act takes
effect September 1, 2013.
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SECTION 4. (a) Except as otherwise provided by this section,
this Act takes effect September 1, 2013.
(b)
Subchapter C, Chapter 354, Finance Code, as added by this Act, takes effect
January 1, 2014.
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